Friday afternoon, Bacterin released fourth-quarter results, following the company’s better-than-expected pre-announcement in January, with revenues in line with the pre-announcement and profitability better than anticipated; a conference call to discuss the results was held Monday morning. The stock closed up 14% on high volume and had been up more than 60% during the day; we believe this was driven by a press release issued regarding use of OsteoSponge in the foot and ankle, along with some bullish commentary by management on the company’s outlook.

The company issued a press release Monday morning before its earnings call that cited positive results from a prospective analysis of OsteoSponge bone graft use in the foot and ankle. While the study is quite small (n=25 patients, 45 total joints), results indicated that 96% of patients showed radiographic fusion at 6-12 months postoperative assessment, a 97% overall fusion rate; the standard of care in other specialties has been about 90% and the study is meant to show at least equivalency, although it is too small to boast superiority.

We believe that there is likely some speculation of a take-out given the attractiveness of this end-market that has been brought to light by Wright Medical’s (WMGI $32.61; Outperform) initiatives with Augment. In addition, expectations for the full year were at a decline before the release, and management’s commentary implied improving performance this year, supported by initiatives to reorganize the salesforce. A combination of these two factors, in our opinion, is the reason for the stock outperformance Thursday, and we believe that the business is steadily improving with CEO Dan Goldberger’s focus.

Total fourth-quarter revenue of $8.3 million (up 1.7% year-over-year, albeit off an easy comparison in the year-ago period) was in line with our target. The company’s biologics segment from core accounts was up 5% year-over-year excluding stocking orders, which speaks to the solid growth of the organic hospital base.

We believe that there are number of opportunities (international initiatives and hMatrix are two of note) that should help buoy revenue growth this year and going forward.

The company delivered a loss per share of $0.08, $0.02 above our target.

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